Photo: Sinafinance
Translated by Andrew Vanburen from a Chinese-language piece in Sinafinance
HONG KONG’S benchmark Hang Seng Index is down some 14% from March levels.
But the somber start to Spring may be about to make a turn for the better, somewhat akin to the upbeat saying: April showers bring May flowers.
In fact, there is sufficient reason to believe that the long-awaited rebound in Hong Kong’s stock market is likely to arrive this week.
Last week we saw the Hang Seng struggle to keep its head above water and gain any traction, thanks to continued angst over Greece and fellow EU members flirting with insolvency, sluggish growth data from the US, the potential for a looming housing crisis in Mainland China and ongoing strife in the Middle East.
Therefore, the long-awaited rebound in the Special Administrative Region’s capital markets has for yet another five-day trading session been written off as a dream deferred.
But for the following reasons, I think there is reason for investors to get out their summer wear, stop merely kicking tires, and seriously think about the possibility of a sustained upward ride for the Hong Kong stock exchange.
First of all, looking at things from a different angle, although the benchmark index performance hasn’t been anything to write home about recently, it has been true that daily declines have been shrinking and full-day rises have generally been steeper than full-day selloffs have been precipitous.
This generally means that the bearish sentiment has been more or less exhausted and while a few blips and sputters are inevitable, the near-term potential for a significant sudden selloff are becoming less and less a likelihood.
Therefore, those holding their breath, closing their eyes and crossing their fingers on the sidelines can likley rest assured that they are not re-entering too early, provided they are willing to ride out a few inevitable stutter steps as the bourse slowly regains traction and churns toward the second half beacon.
Like the robin’s appearance announces the arrival of Spring, last week’s capital flow performance could also be seen as a harbinger of better times ahead.
Money entering the stock market in Hong Kong over the five-day period outstripped money vacating the bourse, a rarity this rainy season to be sure.
This means many things, perhaps most important of all that some of the more adventurous funds as well as institutional investors out there are jumping at the opportunity to lay claim to some of the pearls and other sunken treasures suddenly exposed in the low tide surf.
As long as there is no external shock this week on the political or macroeconomic fronts from Beijing, Washington or Europe, then things should be reasonably in order for a steady rebound here at home in Hong Kong.
Therefore, perhaps now more so than in the past, one can see well-heeled fund managers being whisked back and forth through the Cross Harbor Tunnel paying nearly equal attention to both the front page and the business page of the daily broadsheet.
But as we are still hovering below our five-week average, a sustained rebound still has yet to lay its roots here.
That being said, investors have a lot of thinking to do these days, and a lot of reading as well.
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